Full emissions disclosure under California Senate Bill 253 could change carbon evaluations and redirect investment

Abstract Investors who consider climate impacts often rely on emissions produced directly by companies or from the energy they purchase. Emissions upstream and downstream across the value chain are usually much larger but not reported consistently. California Senate Bill 253 requires large companies doing business in the state to report their full emissions, including those arising across their value chains. We study how California’s law may change how investors compare firms. We identify publicly traded firms subject to the disclosure mandates and use historical data to simulate how sector-peer rankings shift when investors move from direct and energy-related emissions to full emissions. We find that including value-chain emissions significantly changes which firms appear to have stronger or weaker carbon performance relative to sector peers. This reshuffling suggests that investors may redirect capital away from firms with higher value-chain emissions, particularly where such emissions represent a larger share of total emissions.